The Pros and Cons of Expanding your Business Overseas

The Pros and Cons of Expanding your Business Overseas

The rise of the internet has meant that it isn’t just large corporations who can now afford to expand their offering overseas. With the ability to deliver your physical products virtually anywhere by partnering with a giant like Amazon or making use of the local courier services available; or offering your professional services via webinar, email or video conferences, the playing field is a lot more level.

But like any major business strategy decision, conquering a new territory – or even just getting a foothold – comes with its own set of challenges. And while every business is unique, there are some common advantages and disadvantages across the board.

Let’s take a look:

Less competition

The main reason companies consider an overseas expansion is a saturated local market compared with the region they’re thinking of targeting. It might be that the product you’re offering simply doesn’t exist elsewhere, or that the consumers in the region fall more neatly into your ‘ideal customer’ category.

You do need to consider, however, why there’s less competition. Your product might be out of the affordable price range for average resident, or the language barrier might be particularly tricky. Before you proceed full steam ahead, make sure you’ve done very thorough market research, and ideally spent some time actually living in the area.

There’s no better way to get a feel for what doing business there would be like.

Countries actively encouraging foreign investment

If taxes, fees, tariffs or other financial hurdles in your home territory are making running a profitable business difficult, basing your main operations elsewhere might be a potential solution. Take the case of a tax haven like Mauritius, for example.

This small island nation which is home to just 1.3 million people packs a mighty impressive -and growing- economic punch for its size – which has largely been achieved through DTI policies encouraging foreign investment and increasing the ease of doing business.

Firms which focus specifically on corporate services Mauritius actively assist overseas businesses every step of the way. Focusing your expansion efforts on these kinds of countries will make the transition smoother, although you may have to deal with more competition as a result.

Dealing with language barriers and cultural differences

This is another source of potential problems which can only be mitigated through thorough market research. Whether it’s translating your website and marketing material into a new language which might have subtle nuances and potential stumbling blocks you’re not aware of; or considering and identifying cultural sensitivities that could clash with your message, this is an activity best performed on the ground.

While you might not have to spend time in the country yourself, you will definitely need a local consultant to assist you. If you don’t have the resources to accomplish this, it might be better to consider a territory a bit closer to home, at least culturally. On the flipside, being the only business prepared to take the risk of expanding across a more challenging border could reap massive rewards if you get it right!

Hedging your bets

Doing business in more than one country or region can make the business as a whole more resilient. Trends might change rapidly in your home country, but you may well have more time to adapt in areas with an emerging market, using what you’ve learned back home to get ahead of the curve there.

If one end of your business suffers a loss, the profits of the other can be diverted to prop it up if need be. Market fluctuations also naturally have less of an impact if you’re spread across different markets.  

The potential disadvantage of this however, is that your resources are spread more thinly. Things you might have noticed sooner if you had your eye on just one business center could slip through the cracks.

Time zones

In the best case scenario, you can use different time zones to your advantage. This could be through things like being able to offer 24-hour customer support in-house

and having employees at your remote office working and making money for the company even while you sleep. The disadvantages can be just as great, though. Liaising and communicating with your staff hallway across the world becomes tricky, especially if there’s an emergency and they’re not able to reach you in time. For this reason, industries that are very time sensitive find it harder to operate when their sister branches are located on opposite sides of the globe.

Regardless of your industry or business size, you need to spend a good deal of time researching and balancing the pros and cons before making the decision to expand overseas.

Editorial Team
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